What is my receivables turnover time? Efficiency ratios are a great way of analysing the underlying operational efficiency of a business. Jazoodle assesses the efficiency of a company in a number of ways. Areas such as client revenue collection, or how effective its employees are in generating revenues and keeping costs at reasonable levels.
Receivables turnover time
How do you measure the efficiency of people and processes within your organisation? The receivables turnover time is a great way of doing this, and an indicator of company efficiency. Assess this over time and compare periods. In Jazoodle, we assess and compare RTT across financial years as well as on an individual monthly basis.
What does it mean?
The Receivables Turnover Times, (RTT) measure assesses the level of cash sales relative to credit. For instance, if total sales are $100 and a company has $50 in accounts receivables, the measure would be 2 – or cash sales are twice as common as credit sales. A low figure may indicate that underlying cashflow issues may surface from time to time. Please note that it is not possible for Jazoodle to identify how many sales are created by offering credit to a company’s customers. However, it can be estimated by relating the total revenue to the number of debtors that a business has in place.
Check your receivables turnover time with Jazoodle now
How do we derive your RTT?
The level of sales compared to the level of credit outstanding with your clients. Your company’s Receivables Turnover Time is calculated by the following:
Total Income divided by Total Accounts Receivable Amount
Total Income Current Month divided by Total Accounts Receivable Amount Current Month
How Can I Improve my RTT?
Your RTT can be improved in a number of ways, including:
- Collect your client invoices and revenues more promptly
- Increase sales revenues without a similar increase in credit to clients